The determinants of the uptake of carbon finance by renewable energy producers in Kenya

Abstract

Energy use, especially the burning of fossil fuels to provide the power for home and industrial use, is the main catalyst of global warming. The central role played by renewable energy in climate mitigation cannot be downplayed, especially in reducing the emissions of greenhouse gases. Carbon finance has emerged as an attractive financing option to help scale-up renewable energy investments in low and middle-income countries. To establish the determinants of carbon finance uptake among renewable energy developers in Kenya, a two-part model was used to model the variables project size, project sector, carbon offset prices, technology and market affiliation of a project, which are key in the uptake of carbon finance. Results reveal that project size, the technology used in the renewable energy project and the market affiliation, either the voluntary carbon market or the regulatory compliance market are important determinants of the uptake of climate finance among renewable energy developers in Kenya, while the project sector and the prevailing carbon offset prices does not seem to influence the uptake.